Most Adani stocks fall further, valuation guru pegs Adani Enterprises value at Rs 945

NEW DELHI: Adani Group continues to face heat on Dalal Street with most group stocks getting locked into their respective lower price bands of 5% and 10%. This is the 8th straight session when the Group stocks are under tremendous selling pressures.

Monday’s share fall comes as global financial agencies, one by one, are cutting their dealing with the group. 

After Credit Suisse and Citigroup, British lender Standard Chartered has now stopped accepting Adani Group bonds as collateral on margin loans as the port-to-power conglomerate is facing allegations of stock manipulation (among other things) after US short-seller Hindenburg Research published a scathing report on the group on January 24th. 

Meanwhile, the Reserve Bank of India (RBI) has asked banks and Life Insurance Corporation to declare their exposures to the Adani group while India’s capital market regulator Sebi said that it is committed to ensuring the stock market's integrity and all necessary surveillance measures are in place to address any excessive volatility in individual shares.

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On Monday, shares of the group's flagship firm- Adani Enterprises- crashed about 10% to hit a low of Rs 1,434 on the BSE. Six stocks (Adani Total Gas, Adani Green, Adani Transmission, Adani Wilmar, Adani Power, and NDTV) were locked in at their respective lower price bands of 5% and 10% while Adani Ports was trading in with a minor gain of 1%.

The Group’s cement entities- ACC and Ambuja - were in red during the early trading hour of Monday. 

As per early estimates, Adani Group’s combined market capitalisation may fall about Rs 10 lakh crore by the end of today’s trading session if the stocks do not make a comeback. 

New York University professor and valuation guru Aswath Damodaran in a blog post said that he finds the fair value of Adani Enterprises at Rs 945.

Damodaran said even at Rs 1,531, Friday's closing price for Adani Enterprises, the company is priced too high, given its fundamentals that includes cash flows, growth expectations and risks involved. His share price estimate for Adani Enterprises is not based on upbeat assumptions on revenue growth and operating margins.

"The market was over-stretched when it valued the Adani companies collectively at USD 220 billion (Rs 17,600 billion) and Adani Enterprises at USD 53 billion (Rs 4,243 billion)," Damodaran said.

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He added that it is possible that Hindenburg Research was indulging in hyperbole when it described Adani to be 'the biggest con' in history. 

“I am puzzled that Hindenburg's short thesis spends as much time as it does try to convince us that the company is over-levered. Being over-levered is not a con game, but a risk that equity investors in many investments take to increase their returns,” said Damodaran. 

He also said that he will not be buying shares of Adani group companies even if the group shares fall further as investors in family group companies, no matter how honourable the family, are buying into cross holdings, opacity, and the possibility of wealth transfers across family group companies.

The professor said the risks increase if the family group companies are built around political connections, "where you are one political election loss away from your biggest competitive advantage". 

Adani Group stocks prices have crashed after the US-based activist investor firm Hindenburg Research accused the port-to-power conglomerate of pulling the “largest con in corporate history” by engaging in “brazen stock manipulation and accounting fraud” over the course of two decades.

The Adanis have called the Hindenburg report “maliciously mischievous and unresearched” and said it was evaluating legal action.